Fleeing tenants turn Schuylkill Mall into a ghost town

DAVID MCKEOWN/POTTSVILLE REPUBLICAN

While the Schuylkill Mall has been plagued by store departures over the last several years, the vacancies have picked up significantly this year after the property was sold through a bankruptcy auction to a Missouri real estate development firm that has kept mall tenants and the public in the dark about its plans for the structure.

While the Schuylkill Mall has been plagued by store departures over the last several years, the vacancies have picked up significantly this year after the property was sold through a bankruptcy auction to a Missouri real estate development firm that has kept mall tenants and the public in the dark about its plans for the structure. (DAVID MCKEOWN/POTTSVILLE REPUBLICAN)

There, about a mile from the prison and atop an imposing hill, you'll find the ghost town near Frackville that is the Schuylkill Mall.

Early afternoon Monday, few people browsed the roughly 15 shops still open inside the 726,000-square-foot enclosed mall, designed to host more than 100 retailers. In fact, the number of shoppers appeared equivalent to the number of 5-gallon pails set up on the floor to catch water dripping from holes in various parts of the mall's ceiling — a sight tenants say they've grown familiar with in recent years.

"It's a shame; It was a nice mall," said Marie Cress, a 78-year-old Big Mine Run resident who remembers when the mall was bustling with teenagers on weekend nights. "It's actually sad to come up here and see all these stores gone."

Last week, the 37-year-old mall's last anchor, Bon-Ton, told its employees it, too, will join previous anchors Kmart and Sears in closing shop. That leaves shoppers like Cress to venture to the Fairlane Village Mall, a center about 6 miles away on Route 61 near Pottsville that features department store chains Boscov's and Kohl's but is also riddled with empty storefronts.

While the Schuylkill Mall has been plagued by store departures over the last several years, the vacancies have picked up significantly this year after the property was sold through a bankruptcy auction to a Missouri real estate development firm that has kept mall tenants and the public in the dark about its plans for the structure.

Tenants, which were switched to month-to-month leases after the sale, have continued to flee the uncertainty at the once-vibrant mall, which, analysts say, seems destined for other uses.

Fast-food sandwich chain Arby's closed its restaurant at the mall last month, and entertainment retailer FYE is liquidating its store there. The Shoe Dept. and Totally Twisted Soft Pretzel Bakery also have closed there this year, and the mall lost Black Diamond Antiques & Collectibles in 2016. In certain stretches of the mall, it's possible to walk about 100 feet without passing an open store. Compare this scene — in the ballpark of 20 percent occupied — with the current U.S. mall occupancy rate of 93.6 percent as reported by the International Council of Shopping Centers.

JON HARRIS/THE MORNING CALL

Schuylkill Mall, in New Castle Township, Schuylkill County, has been losing tenants over the last several years, but that trend has increased significantly since the mall was sold earlier this year to a Missouri real estate development firm that has not announced its plans for the mall.

Schuylkill Mall, in New Castle Township, Schuylkill County, has been losing tenants over the last several years, but that trend has increased significantly since the mall was sold earlier this year to a Missouri real estate development firm that has not announced its plans for the mall. (JON HARRIS/THE MORNING CALL)

The Schuylkill Mall's fate will be decided by NP New Castle LLC, an entity formed Jan. 30 that bought the mall for $2.1 million on Feb. 28, according to Schuylkill County property records. NP New Castle has the same Riverside, Mo., address as NorthPoint Development, a self-described "development, management and leasing firm that is principally focused on industrial, multi-family and senior living markets in the central part of the United States." In addition, mall tenants said they have been dealing with NorthPoint officials, and an employee in the mall management office directed The Morning Call to contact NorthPoint's corporate office in Missouri.

Several NorthPoint officials did not respond to repeated inquiries from The Morning Call over the past week. On Thursday, an administrative assistant at NorthPoint said the company is not commenting on the mall.

Overstored

While the Schuylkill Mall is spiraling downward quickly, it certainly won't be the last mall to struggle.

Retailers continue to scale back and close underperforming locations in an effort to right-size their brick-and-mortar footprint while attempting to grow online sales — all the while competing with e-commerce giants that don't have the overhead associated with physical stores. The situation is evident in the numbers: The National Retail Federation expects retail industry sales to grow between 3.7 percent and 4.2 percent over 2016, an anticipated increase bloated by a predicted 8 to 12 percent jump in online sales.

PHOTOS: From coast to coast, American retailers, stung by the rise of online shopping, are abandoning brick-and-mortar stores, annoucning closing after closing.

But why is this happening? To Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm headquartered in New York City, it boils down to two things.

For one, he said, the United States is overstored to the point where the country has three times the amount of selling space per person than countries such as Japan, England, France and Canada. In addition, Davidowitz said, 90 percent of retail's growth is online.

"Now just put those two facts together and see where you stand," he said, especially when considering many of the largest online retailers happen to also be in the brick-and-mortar game. Davidowitz suggests taking a look at Staples, which he said has grown its online sales to 55 percent of its business but is still closing about 70 stores in North America this year.

Or, as Marie Cress' daughter-in-law Teri Cress of Cressona summed up the dynamic at Schuylkill Mall, "People aren't going to come up here for one store, especially when they can order stuff online in their underwear."

JON HARRIS/THE MORNING CALL

Schuylkill Mall, in New Castle Township, Schuylkill County, has been losing tenants over the last several years, but that trend has increased significantly since the mall was sold earlier this year to a Missouri real estate development firm that has not announced its plans for the mall.

Schuylkill Mall, in New Castle Township, Schuylkill County, has been losing tenants over the last several years, but that trend has increased significantly since the mall was sold earlier this year to a Missouri real estate development firm that has not announced its plans for the mall. (JON HARRIS/THE MORNING CALL)

To stem the bleeding — or at least slow it down — mall operators have employed a variety of strategies.

Simon Property Group, the Indianapolis shopping mall operator that owns 50 percent of Lehigh Valley Mall in Whitehall Township, has maintained its spot at the top by adapting to trends and reinvesting in its malls. For example, Simon completed a 155,000-square-foot expansion at the King of Prussia Mall in August and is considering what it has called "a lot of different options" for the out-parcel at Lehigh Valley Mall thatWendy's, Friendly's and an office building now occupy.

Other operators, such as Pennsylvania Real Estate Investment Trust, have weeded out their portfolios. PREIT, which owns the other half of Lehigh Valley Mall, has been unloading its underperforming malls since January 2013 in its quest to get to $500 in sales per square foot as a company. In the Lehigh Valley region, PREIT has unloaded Phillipsburg Mall, South Mall, Palmer Park Mall and sold as 50 percent interest in the Whitehall Mall.

While centers like Schuylkill Mall aren't expected to be around much longer, Davidowitz said there are still hundreds of malls doing well — typically the giant upscale malls that have five or six anchors and entertainment options to draw people. But what remains unclear, he said, is whether those destination-type malls will still be doing well in three years or so as the upheaval continues and the viability of more retailers is questioned.

"Now are malls going to disappear?" Davidowitz said. "I'm not predicting that in any way. I'm saying we're in the middle of a gigantic revolution, and we're only in the second inning. So it's hard to predict how dramatic it's going to get.

"I know one thing — everything is going to get worse. Dramatically more stores are going to close."

And to retail analyst Jeff Green, the malls likely to get hit first are the small malls in secondary markets. By comparison, he expects the Class A malls in major metropolitan areas, the strongest malls in secondary markets, like the Lehigh Valley, and power centers with off-price, value retailers such as T.J. Maxx, HomeGoods and Ross, to make it. While Green considers Lehigh Valley Mall to be a B+ or A- mall from a national perspective, he said the Whitehall shopping complex is the strongest mall in the area.

"That will be absolutely fine," said Green, owner of Jeff Green Partners in Phoenix.

Valuable real estate

But the future of brick-and-mortar retail is still murky. What is clear, according to Green and Davidowitz, is that Schuylkill Mall won't be around much longer to find out how bad things could get.

"If a mall dies — and they're dying every day — what you have is valuable land," Davidowitz said. "The land has value, and the question is what can be done with the land? Something has to be done."

NorthPoint's current dealings in Pennsylvania indicate an industrial use could be a possibility for the mall.

The company owns about 1.27 million square feet of warehouse space off Route 901 in Foster Township, Schuylkill County. Elsewhere in Pennsylvania, NorthPoint developed a roughly 755,000-square-foot logistics center near York and is now constructing an 800,000-square-foot distribution center near Wilkes-Barre that online pet supplies retailer Chewy.com will occupy.

And, in Arlington, Texas, NorthPoint has purchased the majority of an 83-acre defunct mall property and wants to build an almost 1.4-million-square-foot industrial complex in its place, the Fort Worth Star-Telegram reported in January. No other malls are listed on NorthPoint's online property portfolio, and retail is not one of the company's four primary areas of focus.

To Green, NorthPoint's plan for the mall is pretty clear.

"They bought it for the real estate. The value of these malls is the ground they're on, and this is a great example of that," said Green, classifying Schuylkill Mall as a "solid D" performer on his scale.

"You can't get much worse than that and still be a mall."

Some of Schuylkill Mall's remaining tenants seem to be reaching the same conclusion.

Sears, once the monolith of American retail, says there is "substantial doubt" that it will be able to keep its doors open.

Company shares, which hit an all-time low last month, tumbled more than 12 percent Wednesday.

Sears has been a member of the retail dead pool for years, but until this week...

Lawrence Nickerson, a full-time employee of Vertigo Systems, which does computer sales and electronics repair at the mall, said there hasn't been much communication between the new owner and the mall's tenants. NorthPoint representatives had a meeting with mall tenants about the same time the deal closed, when Nickerson said the company told tenants it wasn't interested in negotiating long-term leases.

Other mall tenants remain hopeful. Zach Gilbert, general manager of the Pearl Theatre Stadium 8 at the mall, said the theater doesn't have any plans to close, especially after a $2 million renovation in mid-2013 that boosted the venue to eight screens and added the Screening Room Bar & Grille.

While others also hope for a resurgence at a mall they believe has potential, many believe the property will fade to black before it orchestrates a comeback story.

"The writing is on the wall," Nickerson said. "Pretty much coming to work every day is like going to a funeral procession."

SCHUYLKILL MALL

Ownership history: Crown American Realty Trust of Johnstown opened the mall. Then PREIT took over the mall after acquiring Crown American in 2003. It then unloaded the mall to Empire Realty Investments Inc. in March 2007 for $17.6 million. NP New Castle LLC bought the mall for $2.1 million on Feb. 28.

Financial performance: By the end of 2006 — the last full year of PREIT's ownership and the last time the mall was owned by a public company — the Schuylkill Mall was about 73 percent occupied and was doing $181 in sales per square foot, near the bottom of PREIT's portfolio at the time. By comparison, the South Mall at the time was 93 percent occupied and was doing $309 in sales per square foot.